CARE International CARE International

Effective ways to reach smallholdersEffective ways to reach smallholders

Value chain financingValue chain financing

18th October 200718th October 2007

By George OdoBy George OdoThe CARE Africa Venture FundThe CARE Africa Venture Fund

care australiacare thailand

care canadacare denmark

care germany

care france

care japancare netherlands

care norwaycare austria

care uk

care usa

international

““We seek a world of hope, tolerance and social justice, where We seek a world of hope, tolerance and social justice, where poverty has been overcome & people live in dignity & security”poverty has been overcome & people live in dignity & security”

Presentation Content Introduction to CARE Background Identifying the problem The Issues & proposed solutions Some Examples Key Learnings

CARE country offices - Peru, India, Kenya, Indonesia, etc (67 world-wide)

CARE National Members (12) – Australia, Austria, Canada, Denmark, France, Germany, Japan, Netherlands, Norway, UK, USA & Thailand*

CARE International (secretariat in Brussels)

‘Country offices’

‘National members’ &

‘Lead members’

‘CI’

Introduction to CARE – The Federation

One of the largest NGOs in the world 14,800 staff globally About 1169 projects in 16 sectors reaching 48

million people in 67 countries & 60 Country Offices Board of 12 ‘National’ members with secretariat in

Geneva About US $ 700 million annual budget with 43%

spent in Africa, 34 in Asia, 17% in Latin America and 6% Middle East and Europe

Works in both development and emergency situations

Key Sectors - ANR (14%), SEAD (6%), WATSAN (8%), Emergency (4%), Nutrition (4%), HIV/AIDS (8%), Maternal (4%) & Child health (4%)

Introduction to CARE – Vital stats

Introduction to CARE - How we spend our funds

Program costs91%

Support costs9% Relief Ops

29%

Develop-ment71%

Less than 10% Administration costs!

Background - GDP in relation to Poverty

STATE MARKET

NGDO GROUNDED IN 'AXIOMATIC‘ETHICS

AND VALUES

:CIVIL SOCIETY

Source: Alan Fowler, NGO Futures – Beyond Aid

Fourth Position Goals and TasksEnsuring entitlements by:•reduction and re-distribution of risk

•exacting compliance from duty-holders

•reducing costs of compliance

Fourth Position NGDO Roles

•Negotiator/mediator

•Validator

•Watchdog

•Innovator/demonstratorRights-based

principles

The fourth position

Background- NGOs role in the ‘Fourth’ position

Identifying the Problem – CARE’s Making markets work for the poor approach

CARE’s MMWTP strategy was published in 2004 in response to UN Commission on the Private Sector and Development

The commission’s final report Unleashing Entrepreneurship: Making Business Work for the Poor (2004) recognized that:

SMEs in developing countries can drive job creation, innovation and economic growth.

BUT

Entrepreneurs operating in the informal economy lacked access to the legal systems (enabling environment), financial services & BDS

Identifying the Problem – The three pillars of Enterprise development

Spectrum of Financial Service Providers

National & Regional

Investments

& Infrastructure

Large commercial

enterprises &

new ventures

Small & Medium

Enterprises

Small

Economic

Activities

Internal

Savings

& Loans

Internal Savings & Loan schemes, Money lenders, NFP MFIs

FP MFIs, Cooperatives, Revolving Input loan & guarantee funds

Development Financial Institutions

Commercial banks, Private Equity & Venture Capital Funds

$100 loans $ 1, 000 to $ 10,000 up to $ 50,000

$ 100,000 to$ 1,000,000

$ 1,000,000 to $ 5,000,000 & above

SME Funds,Social Venture Funds,MFI Banks

Underserved in the BOP

Access to Financial Services

Proposed Solution

Problem Solution

High Transaction cost Aggregation

Lack of collateral Guarantees through ‘forward’ Market contracts

Lack of entrepreneurial experience

Entrepreneurial focused TA

Weak & Informal Institutions

Formalize institutions & governance training

“Start with the market….and work backwards”

Market Demand

Produce

Aggregator

InputsGoods

Aggregation of the smallholders goods

Aggregation of the smallholders demand for goods or services

CARE’s approach – Integrating smallholders

Market ‘contracts’ as collateral

Inputs/cash advances on credit pre financed By Aggregator/Exporters/buyers

Examples – Village savings and Loans

Group organization

Regular modest Savings

Savings & Lending

Savings Lending & repayments

Investments into Micro enterprises like smallholder farming & consumption

Savings Lending & repayments

S&L Term ends & distribution to members

Also known as Internal Savings & Loans, based upon ROSCAs ‘Merry go round’ model

Examples - Aggregation of production

Examples - Aggregation of livestock production

Examples - Aggregation of demand

Key Learnings ‘Mimic’ the real world….smart

subsidies...’Aid for Trade’…’Market Aid’ Avoid distortion Sustainability Private sector integration Traditional grant funding and traditional

development models don’t work Blend commercial and grant mechanisms